| Interest rate chest-beating is a con
Or are they playing to the crowd in the hope no one notices the holes in the arguments they make?Mortgage lenders deal in the commodity of money. Their business model is to lend monety to home buyers for more than they pay to borrow it themselves. The spread between their borrowing and lending costs, less their expenses determines their profits - which some say are too much.Wholesale money market rates are not set by the Australian Treasury or the Austyralian Reserve Bank.If the politicians really want to keep interest rates down, maybe they should arrange for the government to lend to home lenders at below market rates. Otherwise they should put up and shut up and let the market do its job of deflating the housing market.If house prices drop by an average of say 20% , they will be a lot more affordable to people, even if interest rates go up a few more times.
US rate cuts to boost house prices in Dubai, Abu Dhabi and Hong Kong
Hong Kong residents are perhaps more used to playing their property market than people living in the Gulf, whose freedom to buy has only emerged from relatively recent market liberalisation. They have therefore been quicker to recognise what lower interest rates mean for real estate and mortgage applications are up by 50 per cent; and to be fair the Hong Kong banks have also been much quicker to adjust mortgage products to take advantage of low interest rates. House price inflationBut lower finance costs ripple across the whole property development chain from land prices right through to secondary sales. If it is cheaper to finance development then profits are bigger. If home finance costs are falling, and look likely to fall further, then more buyers will enter the market. It is an upward price spiral or house price inflation that will result.
How you can survive a recession
Stockmarkets in turmoil, falling house prices and a warning this week from the head of the Bank of England that we should brace ourselves for a tough 12 months. All in all, the prognosis is not good. In our front-page article, we look at ways of benefiting financially from a possible recession. But for many people, it will not be making money out of a downturn that is uppermost in their mind - it will be how best to insulate their finances so they do not end up worse off. Here, Guardian Money offers advice on how to make your finances recession-proof. Mortgages The good news is that the US Federal Reserve's decision to slash interest rates this week puts further pressure on the Bank of England to take similar action here. That could mean lower borrowing costs for millions of mortgage-holders.
What Is Fixed Rate Mortgage And Variable Rate Mortgage
Fixed rate mortgage, as the name suggests, carries a fixed interest for a certain period of time. That period is called as mortgage term. The term can usually be from 6 months to as long as 25 years. A variable rate mortgage has a fixed payment terms too. But its interest rate changes. It moves in pattern to the prevailing interest rates in the market. You pay a fixed amount, but it will be divided into interest payment and principal payment. So it follows that if the interest is high, more money goes for the payment for it instead of the principal. .
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